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New Mexico Supreme Court Rules Payday Lenders Cannot Force Consumer into Arbitration with Substitute Arbitrator

New Mexico Supreme Court Rules Payday Lenders Cannot Force Consumer into Arbitration with Substitute Arbitrator

The New Mexico Supreme Court on Thursday rejected an attempt by two Internet payday lenders to force a consumer to take her claims against the lenders before an arbitrator rather than a court of law. The full opinion is available here: http://www.publicjustice.net/sites/default/files/downloads/FeltsvCLKOpinion_23Aug2012.pdf Public Justice represented Andrea Felts (pictured), who took out three online loans when she was going through a divorce and needed extra money to make ends meet. But the illegally high interest rates kept her on a treadmill of debt. When she was no longer able to make her payments on the loans, the lenders embarked upon a harassment campaign, calling Felts and her teenage daughter at home and at work, sometimes more than 20 times a day. The lenders even went so far as to threaten Felts with jail. Felts sued CLK Management and Cash Advance Network for violating New Mexico’s consumer protection laws, noting that the interest rates on her $400 to $500 loans ranged from 521 to 730 percent, amounts well above the state’s cap for payday loans. The companies maintained that they were not bound by the state’s consumer laws, but that Felts was bound by contract to submit any challenges or complaints to arbitration rather than try the case in court. When Felts first took out the loans, the lenders’ arbitrator was the National Arbitration Forum, notorious for its close associations with banks and debt collectors. But a 2009 consent decree with the Minnesota Attorney General drove the NAF out of the consumer arbitration business. Still, the lenders insisted on arbitrating Felts’ case, and argued that the court had only to appoint a new arbitration provider. In Thursday’s decision, the state’s high court disagreed, holding instead that the selection of the NAF was “integral” to the parties’ contract and, therefore, if it appointed a new arbitrator, the court would essentially have to rewrite the contract. To view all of the case documents for Felts v. CLK Management, click here: http://www.publicjustice.net/content/felts-v-clk-management-inc Felts is represented by Public Justice’s Senior Attorney Paul Bland and Goldberg Attorney Amy Radon, Rob Treinen of the Treinen Law Office in Albuquerque, and Douglas Micko and Richard Fuller of the Schaefer Law Firm, LLC, in Minneapolis, Minn. Photo courtesy of Kip Malone (http://www.kipmalone.com/).